Maturity value is the amount of money payable to an investor in a security at the end of its holding period. For most bonds, it is simply the par or face value of the bond. For a certificate of deposit (CD) or money market fund, interest is not paid at regular intervals, and it is instead paid along with the principal, initial investment, at the end of the holding period. Investors in CD and money market funds need to calculate the maturity value of their security.

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Steps

Method 1 of 3: Calculating and Understanding Maturity Value

1

Learn the basics before resorting to spreadsheets or online tools. It is important to know the components behind calculating the maturity value even if you plan on using a spreadsheet program, online financial tool or calculating it by hand. A basic comprehension of the components will make you a better investor and provide a more intuitive understanding of finance.

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2

Understand what you are finding with maturity value. Maturity value is defined [1] as the “The amount to be paid to the holder of a financial obligation at the obligation's maturity. In the case of a bond, the maturity value is the principal amount of the bond to be paid by the issuer to the owner at maturity.” It is most commonly applied to CDs and money market funds since a bonds maturity value is the face value, typically $1,000.

3

Learn the components. The maturity value consistent of two components, the principal or initial investment and the interest earned. The simplified equation is Principal + Interest Earned = Maturity Value.

4

Calculate the interest earned. This is the toughest part of maturity value. There are three variables you will use to find the amount of interest earned: the time period, interest rate, and principal. The equation is Principal x Interest Rate x Time = Interest Earned

5

Find the periodic rate: When interest accumulates on a debt security it is added at periodic intervals. The added money then begins earning more interest, thus compounding the earnings. To find the periodic rate, divide the annual interest rate by the number of times each year the interest is calculated and added. For example, if a CD earns 4.80 percent annually and is compounded monthly, divide 0.0480 by 12 for a periodic rate of 0.004 (0.4 percent).

6

Use the APR to calculate the value after period 1. After you find the periodic rate, you would multiple the principle by the periodic rate (Rate x Principal = Interest Earned Period 1). You then add this to the principal (Interest Earned Period 1 + Principal = Starting Value of Principal for Period 2. You then repeat this step for each period. This demonstrates the value of compounding frequency on the amount received. However, there is a simplified formula use.

7

Apply this formula to quickly calculate maturity value. The formula is V = P x (1 + r)^n[2] where V is the maturity value, P is the principal (starting value), and n is the number of compounding intervals from the time of issue to maturity. For example, the formula for a 5-year, $10,000 CD compounded monthly with an annual rate of 4.80 percent is V = $10,000 times (1 + 0.004)^60. The maturity value V works out to $12,706.41

n Number of Compounding Periods: Calculated by taking the number of years in the security and multiplying by the frequency of compounding. So for a 5-year security compounded semi-annual, the formula is n = 5 x 2 = 10.

r Interest Rate: This is the periodic interest rate and is defined by the annual interest rate divided by the number of times it compounds per year. So if the annual rate is 5% and it compounds semi-annual, the formula is 0.05/2 = 0.025 or 2.5%.

8

Input your information to the maturity value formula. Now that you understand the components, plug in the data for your CD or money market fund. Remember the maturity value formula here is for securities that do not pay interest until the end the expiration of the security.

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Method 2 of 3: Using Microsoft Excel

1

Open excel and create labels for cells. After you open excel, label cells down the first column with these components of maturity value: Interest Rate, Principal, Frequency Compounded, Years and Security Value.

The corresponding cells would be A1, A2, A3, A4 and A5 respectively for Interest Rate, Principal, Frequency Compounded, Years and Security Value.

2

Enter the corresponding values in the adjacent column. Immediately next to the labels create in step 1 enter the values for your security except CD value. Most of these are straight forward with the exception of “Frequency Compounded”.

Frequency compounded is the number of times interest compounds. This could be anywhere from annually to daily. If you use an APR, the interest rate is already adjusted so you would enter 1 for the “Frequency Compounded” value.

In this example, an investor buys a three year $5,000 CD that compounds monthly with an annual interest rate of 8%. You would enter $5,000 for principal, 12 for frequency compounded, 8% for the interest rate and 3 for the number of years.

3

Enter the maturity value formula in the cell next to “Security Value”. The formula is Principal x (1+(Interest Rate/Frequency Compounded)^(Number of years*Frequency Compounded)). Select the corresponding cell for each of these items. For example, if the interest rate is in B2, you would type B2 into that spot in the formula. The formula in excel should look like this =B3*((1+B2/B4)^(B2*B4)).

Using the numbers from step 2, the maturity value is $6,351.19

4

Calculate the interest earned on the investment. If you subtract the principal from the security value given by the preceding formula, you will see the amount of interest earned over the investment period.

For this example, that is $6,351.19-$5,000 = $1,351.19

5

Play with the data. You can change the values now that you have this built in Excel. This will demonstrate the impact of each variable on the value of your investment. It is a good tool to better understand finance and investing.

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Method 3 of 3: Utilizing an Online Calculator

1

Search for an online maturity value calculator. Find an online calculator for maturity value in your favorite search engine. Make your search specific to the security you are valuing. If it is a money market fund, type in "money market fund maturity value calculator". The same for a CD or a specific type of bond.

2

Select one from a reputable site. The quality and usability of each online calculator tool can vary greatly. It is recommended to look at a few or even use two different calculators to validate the results.[3]

A reputable site could have a big name like CNN Money, CNBC, or Forbes behind it.[4] Other good options should not flood you with advertising and look professional. It is probably good to find another option if If a site asks for your information, email or address, before using it.

3

Input your information. Enter the data from your investment or proposed investment into the calculator tool. This will include the principal, annual rate of interest and the duration of the investment. It may also include the frequency of compounding for the investment.

4

Check the result. Make sure that the maturity value makes sense. As recommend in step two, it probably makes sense to confirm the result in another online tool.

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